It isn't hard to recognize a Pakistani Taliban fighter. Most of the thickly bearded men are barely in their 20s  members of a new and fiercer generation of jihadists. Their long black hair flows down past the shoulders on which they rest their rusty Kalashnikovs. Some wrap their heads in a black turban; others favor an embroidered red skull cap, modeled on the type worn by Abdul Rashid Ghazi, the militant leader killed during the army's high-profile siege of Islamabad's Red Mosque in July 2007. They shield their bodies with camouflage bulletproof vests, which usually have a grenade or two hanging from them. And under their hiked-up baggy trousers, all sport a pair of dirty white sneakers, with which they swagger menacingly around their freshly captured territory.

Both domestic and global alarm was sparked in recent days when this ragtag army seized Buner, a district about 70 miles as the crow flies away from Islamabad, after a fortnight of intrusions from their base just north in the Swat Valley. U.S. Secretary of State Hillary Clinton led a chorus of international condemnation last week, accusing Islamabad of "basically abdicating" to the extremists in the face of the threat. U.S. Secretary of Defense Robert Gates echoed her remarks and said Pakistan faced an "existential threat." (See pictures of the Taliban's move into Buner.)

At home, the government was assailed by vocal critics who accused it of capitulating to the Taliban. Pakistan army chief General Ashfaq Kayani hit back at Western criticism over the weekend, saying he condemned "pronouncements by outside powers raising doubts on the future of the country." On Saturday the army launched a limited military operation in Lower Dir, a hitherto peaceful area that lies between Swat and the tribal areas. After two days of fighting, troops backed by helicopter gunships are believed to have killed 50 Taliban fighters. In reply, the Taliban said they have halted peace talks, bringing the tenuous accord in the Swat Valley under strain. After negotiations, and the threat of military action, the militants have now scaled back their presence in this idyllic valley of open fields, endless rows of trees and rushing rivers. But despite Taliban assurances that it has pulled back from the valley, scores of fighters still roam freely. Under a pall of fear, Buner's residents worry that if the Taliban resume their rampage, the government will not be in a position to stop them.

Over the last fortnight, gunmen took over a centuries-old shrine of a Sufi saint, driving out devotees of Islamic mysticism. An aid office belonging to the World Health Organization was ransacked, supplies of cooking oil were looted, and office furniture was hurled out. Women were barred from public places, and barbers were forbidden from shaving beards. Many residents fled. As the local police took refuge in the confines of their stations, the Taliban erected a series of checkpoints throughout Buner Valley, positioning themselves as an alternative authority. The occupation's proximity to Pakistan's capital heightened fears of the Taliban's expanding ambitions and underscored the perils of the government's truce with the militants.

"Things are very bad," says Abdur Rashid, the district police chief, in an interview at his fortified office. Rashid has less than 500 police constables under his command. They were never in a position to defend this valley of more than half a million residents from what he estimates to be up to 1,000 Taliban militants. (Other officials have put the figure lower, at around 600.) "When you are confronted with better equipped and better trained people who have higher morale, the writ of the district police collapses," he says. Rashid's colleagues have expressed equal anxiety. "They were about to come for us directly. They were just on top of there yesterday," says an officer, pointing to one of the vast green hills that encircle Buner.

In the absence of a police presence, it fell to the local residents to organize their own defense. Buner has a history of standing up to the Taliban. Last year, the villagers of Shalbandai formed a lashkar, or tribal militia, and decisively pushed back the militants. The militants vowed revenge and later dispatched a suicide bomber to the village, who killed more than 30 people and injured others during a by-election. Earlier this month, Fateh Khan, a local businessman, gathered members of his Gadeze clan to fight back. "The people came out," recalls Rashid, with a flash of admiration in his eyes. "A call was given, asking the Taliban to go back. They said they were happy with the Shari'a law"  after halting its military operation in February, the government caved in to the Taliban's demands for Islamic law to be imposed across Malakand division, which includes Swat and Buner  "but did not want any armed men entering Buner."

A fierce gun battle ensued. Local residents recall the episode with excitement, citing varying figures of the number of Taliban fighters killed. The police estimate 20; others triple that figure. Three police officers were killed in the fighting, and two members of the militia, including Khan's driver and servant. The humiliation prompted the Taliban to summon reinforcements. Swat provided them with an uninterrupted supply line of weapons and fighters. Fateh Khan fled with his men, while Maulvi Khalil  a Taliban commander  entered the district, setting up his headquarters at Khan's home and taking over his businesses. The targeting of the wealthy has been a constant feature in the Taliban's advances in this part of the northwest. In Swat, the Taliban were at first able to lure a section of the poor into their ranks by exploiting the deep economic divisions and resentment of what they saw as Pakistan's venal police and justice system.

But in Buner there are other targets of greater interest to Taliban commanders than a few wealthy residents. Strategically located, it connects to routes in six other districts. At the height of its hold on Buner, the Taliban sent fighters into Shangla district to the north. They also, no doubt, eyed the vast supplies of marble that are carved out of Buner's mountains and processed at dozens of "marble factories" that are dotted around the valley. They've used similar tactics before; in Swat, the Taliban seized control of the emerald mines, ravaged the dense forest near Malam Jabba for income. In the tribal areas, other militants have derived funds from quarrying marble as well. According to a local marble trader, who declined to be named out of fear of Taliban reprisals, the militants have already imposed a "tax" on his sales. (See pictures of a jihadist's journey from Pakistan to Mumbai.)

One of the militants' first targets in Buner was the shrine of Sufi Baba, a Sufi saint. Since his death five centuries ago, devotees have streamed to this valley from across the subcontinent to pay homage. Now the ornately designed building, with white and green paint peeling off after years of neglect, is abandoned. "The Taliban came here and closed everything," says Abdul Wahab, the half-blind, elderly caretaker. Behind him, the stall that used to sell traditional perfumes is bolted shut. Decorations have been destroyed, with colored strips of tinsel strewn on the ground. At the site of Sufi Baba's grave, there is just one visitor.

The assault on the shrine has affected the surrounding area. Small hotels have closed, and the bazaar has emptied out. Lal Muhammad, a barber, has had only two customers all day. The Taliban forbade him two weeks ago from shaving beards, though he may still cut hair. It's little consolation. "People are too afraid to come out," he says, casting his eyes around nervously for unintended ears. As in other areas within the Taliban's reach, many are afraid to speak openly. A few yards away, Mohammed Kabir similarly mourns the fate of his shop that sells women's clothes, bangles and shampoo. "It was started 50 years ago," he says, "by my father." But his regular customers can no longer return. "The Taliban have put a ban on women coming to shops."